financial mistakes to avoid for every decade _ imoney

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Learning Centre

By Rebecca Shamasundari . 26 November 2014 . Cards, Credit Card, Debt Management, Insurance, Investment, Life Insurance, Money Management, Retirement planning,

Will Writing

Every one of us make mistakes with money. We do not save enough or we spend too much on something silly. Sometimes, we sell our shares too

soon or too late. It is likely that we would still be making money mistakes well into our 60s. Here are the financial slip-ups to watch out for at each

decade of your life. Avoiding these financial mistakes as you go along can save you a lot of stress and money, both now and in other stages of

your life.

In your 20s

In your 20s, you are most probably new in the workforce, trying to work your way up. Unfortunately this also translates to a low income but being

young, socialising usually takes priority causing you to overspend and under-save.

Overestimating purchasing ability

You could be wanting to travel the world or buy a luxury car, but you do not earn enough to afford these things. If you cannot pay for these wants

from your own pocket, you may end up incurring huge debts that hold you back for years. Get used to saving for the things you want instead of

solely depending on credit.

Delaying retirement savings

When you are in your 20s, retirement canseem far away. The earlier you start stashing away savings for this purpose, the more you will earn

with compounding interest and the more comfortable your retirement will be. The money you save in your 20s is potentially worth way more than

anything you will set aside in your 40s.

Abusing credit cards

While credit cardsserve a valuable service by providing convenience, they can also tempt you into living beyond your means. At this stage, your

credit card bills can seem burdensome if you are not careful. Failing tosettle the full amount, you may resort to paying theminimum balance only,

incurring a big sack of accumulated interest (Find out how you can pay-off your debts). Create a spending plan based on your income and stick to

it. Use credit cards only if you can pay the balance off in full at the end of the month.

In your 30s

Financial Mistakes To Avoid For Every Decade

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In your 30s, you are most probably married, and started to plan for your family which may involve having kids. More and more financial

responsibilities are pouring in, and it will take some finesse and strategy to balance your finances and provide the best for your family.

Not planning for your childrens future education needs

Holding your bundle of joy in your arms, the thought of him or her going to the university may seem light years away. But, time flies faster than

you could ever imagine. As the cost of a university education is set to rise as years roll by, you should start planning for your childs university fund

right from the birth of your child. If you have more than one child to fund through university, these figures can rack up quite high (Find out how youcan save for your childrens future education needs). By procrastinating or not having an education fund at all, you may be forced to dip into your

retirement fund before your golden years.

Taking insurance lightly

Individuals in their 30s often neglect to protect themselves with adequate insurance. They often lose out on the chance to buy life insurance at a

lower premium and delay the purchase of disability, personal accidentor health insurance. Going without sufficient coverage is financially risky.

With having dependents such as spouse, children and aging parents, it guarantees a financial safety net for your entire family if something were

to happen to you.

In your 40s

In the 40s, one would most probably have reached the peak of their career and be earning substantially more than you were in your 20s (or even

your 30s). However, many are still busy spending money on the things they want right now, such as vacations, bigger cars, or new houses, and

delaying their retirement savings.

Not reviewing your investment portfolio

Yes, it is a good thing that you have an active investment portfolio, but as you go through different stages in life, your risk tolerance changes. You

may have been willing to take more risks when you were in your 30s as you still had the ability and time to earn an income. However, as you are

nearing retirement, you may want to review your portfolio to allocate more of your assets in more conservative investments. However, moving

your investments to a safer avenue too early could also cause you to run short on your nest egg. You need to ensure that your savings can

support you well through retirement. Balance is the key!

Ignoring will

Obviously it is hard to imagine being in your death bed when you are still young and active. However, writing a will should be on your must-do list

when you are in your 40s, if not earlier. A will protects your family and your assets if something happens to you. It also ensures that you have an

attorney that will make financial and legal decisions on your behalf if you become incapacitated.

In your 50s
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In the 50s, your children are in university and only a decade more to go before retirement.

Using retirement savings to pay for childs education

If you have children, it is not wrong to help pay for their tertiary education related expenses, but not at the expense of your retirement savings.

Too many parents sacrifice their retirement savings and withdraw from their EPFin favour of their childrens education. Put your retirement needs

first and do what you can to save for both, which is why its important to start planning for both as early as possible.

Investing like you are in your 30s

As you are nearing your retirement you become even more protective of your savings in your 50s. Considering the fact that you could be living

well into your 80s or 90s, you require a substantial amount in retirement. Simply preserving capital is not a sustainable financial strategy, the

money must be put to work. While investing money in an investment is risky, it is equally risky for if the money is kept under the mattress. So

make sure you keep growing your nest egg well into your 50s and beyond, to combat against inflation and support you financially.

In your 60s

In the 60s, you have finally retired, wrinkles set in, and your children have settled and have started their own families. Money becomes extremely

important to you now that you no longer have an income stream. The best case scenario would be to enjoy your golden years in relaxation and do

things that you were too busy or didnt get to choose before, when you were still climbing the corporate ladder.

Completely abandoning investments

You tend to build your funds until you retire, and then stop proactively building and start living off those funds. However, retirees can continue to

maximise on their investments to stretch their retirement income through investments that offer monthly or quarterly distributions. Ensuring your

investments deliver a steady income stream can help you better manage your budget and stretch your money further (Find out what are the low-

risk investmentsthat retirees can invest in).

Not maintaining a medical insurance

As you grow older, your medical insurance becomes more and more expensive. Most people would cancel it, and focus their finances in other

areas of their lives. However, there is a reason why the cost of medical insurance increase in tandem with your age people are prone to

sickness as they get older and medical bills would start pouring in. That is when it will hit that you should have kept your medical insurance.

Making full use of financial opportunity at every decade of your life is important. More money handled appropriately means more opportunities

and more financial security for you and your family.

Knowing your net worthwill allow you to evaluate your nancial standing and help you

meet your nancial goals.

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Rebecca Shamasundari

A strong believer in this quote: Emotions are best enacted in writing, Rebecca has previously worked in the areas of financial

writing and external affairs, prior to joining iMoney.my as a writer. She has also done freelance writing and editing for various

publications.

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